Nielsen Holdings plc (Exact name of registrant as specified in its charter)

Transcription

1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C Form 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2016 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number Nielsen Holdings plc (Exact name of registrant as specified in its charter) England and Wales (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 85 Broad Street New York, New York (646) A C Nielsen House London Road Oxford Oxfordshire, OX3 9RX United Kingdom +1 (646) (Address of principal executive offices) (Zip Code) (Registrant s telephone numbers including area code) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T ( of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of accelerated filer, large accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act. Large accelerated filer x Accelerated filer Non-accelerated filer (do not check if a smaller reporting company) Smaller reporting company Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No x There were 361,110,603 shares of the registrant s Common Stock outstanding as of March 31, 2016.

2 Table of Contents Contents PAGE PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements Item 2. Management s Discussion and Analysis of Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk Item 4. Controls and Procedures PART II. OTHER INFORMATION Item 1. Legal Proceedings Item 1A. Risk Factors Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Item 3. Defaults Upon Senior Securities Item 4. Mine Safety Disclosures Item 5. Other Information Item 6. Exhibits Signatures

3 P ART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements Nielsen Holdings plc Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended March 31, (IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA) Revenues $ 1,487 $ 1,458 Cost of revenues, exclusive of depreciation and amortization shown separately below Selling, general and administrative expenses, exclusive of depreciation and amortization shown separately below Depreciation and amortization Restructuring charges Operating income Interest income 1 1 Interest expense (79) (73) Foreign currency exchange transaction losses, net (1) (26) Income from continuing operations before income taxes Provision for income taxes (44) (38) Net income Net income attributable to noncontrolling interests 1 Net income attributable to Nielsen stockholders $ 100 $ 63 Net income per share of common stock, basic Income from continuing operations $ 0.28 $ 0.17 Net income attributable to Nielsen stockholders $ 0.28 $ 0.17 Net income per share of common stock, diluted Income from continuing operations $ 0.27 $ 0.17 Net income attributable to Nielsen stockholders $ 0.27 $ 0.17 Weighted-average shares of common stock outstanding, basic 361,580, ,169,651 Dilutive shares of common stock 3,620,469 4,192,306 Weighted-average shares of common stock outstanding, diluted 365,201, ,361,957 Dividends declared per common share $ 0.28 $ 0.25 The accompanying notes are an integral part of these condensed consolidated financial statements

4 Nielsen Holdings plc Condensed Consolidated Statements of Comprehensive Income (Unaudited) Three Months Ended March 31, (IN MILLIONS) Net income $ 101 $ 63 Other comprehensive income/(loss), net of tax Foreign currency translation adjustments 91 (172) Available for sale securities (1) 3 Changes in the fair value of cash flow hedges (2) (7) (3) Defined benefit pension plan adjustments (3) 7 6 Total other comprehensive income/(loss) 91 (166) Total comprehensive income/(loss) 192 (103) Less: comprehensive income/(loss) attributable to noncontrolling interests 2 (3) Total comprehensive income/(loss) attributable to Nielsen stockholders $ 190 $ (100) (1 ) Net of tax of zero and $(2) million for the three months ended March 31, 2016 and 2015, respectively (2 ) Net of tax of $1 million and $2 million for the three months ended March 31, 2016 and 2015, respectively (3 ) Net of tax of $1 million and $(1) million for the three months ended March 31, 2016 and 2015, respectively The accompanying notes are an integral part of these condensed consolidated financial statements

5 Nielsen Holdings plc Condensed Consolidated Balance Sheets March 31, December 31, (IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA) (Unaudited) Assets: Current assets Cash and cash equivalents $ 432 $ 357 Trade and other receivables, net of allowances for doubtful accounts and sales returns of $27 and $26 as of March 31, 2016 and December 31, 2015, respectively 1,239 1,235 Prepaid expenses and other current assets Total current assets 2,054 1,908 Non-current assets Property, plant and equipment, net Goodwill 7,887 7,783 Other intangible assets, net 4,799 4,772 Deferred tax assets Other non-current assets Total assets $ 15,588 $ 15,303 Liabilities and equity: Current liabilities Accounts payable and other current liabilities $ 915 $ 1,013 Deferred revenues Income tax liabilities Current portion of long-term debt, capital lease obligations and short-term borrowings Total current liabilities 1,504 1,687 Non-current liabilities Long-term debt and capital lease obligations 7,471 7,028 Deferred tax liabilities 1,024 1,074 Other non-current liabilities Total liabilities 10,876 10,676 Commitments and contingencies (Note 11) Equity: Nielsen stockholders equity Common stock, 0.07 par value, 1,185,800,000 and 1,185,800,000 shares authorized; 361,738,715 and 362,338,369 shares issued and 361,110,603 and 362,338,369 shares outstanding at March 31, 2016 and December 31, 2015, respectively Additional paid-in capital 5,066 5,119 Retained earnings Accumulated other comprehensive loss, net of income taxes (969) (1,059) Total Nielsen stockholders equity 4,516 4,433 Noncontrolling interests Total equity 4,712 4,627 Total liabilities and equity $ 15,588 $ 15,303 The accompanying notes are an integral part of these condensed consolidated financial statements

6 Nielsen Holdings plc Condensed Consolidated Statements of Cash Flows (Unaudited) Three Months Ended March 31, (IN MILLIONS) Operating Activities Net income $ 101 $ 63 Adjustments to reconcile net income to net cash provided by operating activities: Stock-based compensation expense Currency exchange rate differences on financial transactions and other losses 1 26 Depreciation and amortization Changes in operating assets and liabilities, net of effect of businesses acquired and divested: Trade and other receivables, net 3 47 Prepaid expenses and other current assets (45) (56) Accounts payable and other current liabilities and deferred revenues (191) (200) Other non-current liabilities (7) (1) Interest payable Income taxes 15 9 Net cash provided by operating activities Investing Activities Acquisition of subsidiaries and affiliates, net of cash acquired (47) (191) Additions to property, plant and equipment and other assets (28) (33) Additions to intangible assets (81) (69) Other investing activities 2 Net cash used in investing activities (156) (291) Financing Activities Net payments under revolving credit facility (164) (205) Proceeds from issuances of debt, net of issuance costs Repayment of debt (25) (25) Cash dividends paid to stockholders (101) (90) Repurchase of common stock (83) (141) Proceeds from exercise of stock options 18 6 Other financing activities (11) (3) Net cash provided by financing activities Effect of exchange-rate changes on cash and cash equivalents 14 (28) Net increase in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period $ 432 $ 343 Supplemental Cash Flow Information Cash paid for income taxes $ (29) $ (29) Cash paid for interest, net of amounts capitalized $ (29) $ (16) The accompanying notes are an integral part of these condensed consolidated financial statements

7 Nielsen Holdings plc Notes to Condensed Consolidated Financial Statements 1. Background and Basis of Presentation Background Nielsen Holdings plc ( Nielsen or the Company ), together with its subsidiaries, is a leading global information and measurement company that provides clients with a comprehensive understanding of consumers and consumer behavior. Nielsen is aligned into two reporting segments: what consumers buy ( Buy ) and what consumers watch and listen to ( Watch ). Nielsen has a presence in more than 100 countries, with its registered office located in Oxford, the United Kingdom and headquarters located in New York, USA. Basis of Presentation The accompanying condensed consolidated financial statements are unaudited but, in the opinion of management, contain all the adjustments (consisting of those of a normal recurring nature) considered necessary to present fairly the Company s financial position and the results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the U.S. ( U.S. GAAP ) applicable to interim periods. For a more complete discussion of significant accounting policies, commitments and contingencies and certain other information, refer to the consolidated financial statements included in the Company s Annual Report on Form 10-K for the year ended December 31, All amounts are presented in U.S. Dollars ( $ ), except for share data or where expressly stated as being in other currencies, e.g., Euros ( ). The condensed consolidated financial statements include the accounts of Nielsen and all subsidiaries and other controlled entities. The Company has evaluated events occurring subsequent to March 31, 2016 for potential recognition or disclosure in the condensed consolidated financial statements and concluded there were no subsequent events that required recognition or disclosure other than those provided. Earnings per Share Basic net income per share is computed using the weighted-average number of shares of common stock outstanding during the period. Diluted net income per share is computed using the weighted-average number of shares of common stock and dilutive potential shares of common stock outstanding during the period. Dilutive potential shares of common stock consist of employee stock options and restricted stock. The effect of 1,609,503 and 2,418,103 shares of common stock equivalents under stock compensation plans were excluded from the calculation of diluted earnings per share for the three months ended March 31, 2016 and 2015, respectively, as such shares would have been anti-dilutive. Devaluation of Venezuelan Currency Nielsen has operations in both the Buy and Watch segments in Venezuela and the functional currency for these operations was the Venezuelan Bolivares Fuertes. Venezuela s currency has been considered hyperinflationary since January 1, 2010 and, accordingly, the local currency transactions have been denominated in U.S. dollars since January 1, 2010 and will continue to be until Venezuela s currency is deemed to be non-hyperinflationary. The Company currently expects to be able to access U.S. dollars through the DICOM market. DICOM has significantly higher foreign exchange rates than those available through the other foreign exchange mechanisms. At March 31, 2016, the DICOM exchange rate was bolivars to the U.S. dollar. The Company will continue to assess the appropriate conversion rate based on events in Venezuela and our specific facts and circumstances and whether to continue consolidation. Total net monetary assets in U.S. dollars at the March 31, 2016 DICOM rate were $2 million

8 2. Summary of Recent Accounting Pronouncements Classification and Measurement of Financial Instruments In January 2016, the FASB issued an Accounting Standards Update ( ASU ), Recognition and Measurement of Financial Assets and Financial Liabilities. The new standard was issued to amend the guidance on the classification and measurement of financial instruments. The new standard significantly revises an entity's accounting related to the classification and measurement of investments in equity securities and the presentation of certain fair value changes for financial liabilities measured at fair value. The new standard also amends certain disclosure requirements associated with the fair value of financial instruments. The new standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, Early adoption for most of the provisions is not allowed. Nielsen is currently assessing the impact of the adoption of this ASU will have on the Company s condensed consolidated financial statements. Leases In February 2016, the FASB issued an ASU, Leases. The new standard amends the recognition of lease assets and lease liabilities by lessees for those leases currently classified as operating leases and amends disclosure requirements associated with leasing arrangements. The new standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, Early adoption is permitted. The new standard must be adopted using a modified retrospective transition, and provides for certain practical expedients. Transition will require application of the new guidance at the beginning of the earliest comparative period presented. Nielsen is currently assessing the impact of the adoption of this ASU will have on the Company s condensed consolidated financial statements. Investments- Equity Method and Joint Ventures In March 2016, the FASB issued an ASU, Investments- Equity Method and Joint Ventures: Simplifying the Transition to the Equity Method of Accounting. This new standard eliminates the requirement to apply the equity method of accounting retrospectively when a reporting entity obtains significant influence over a previously held investment. This guidance is effective for fiscal years and interim periods within those fiscal years beginning after December 15, Under the provisions of this ASU, when circumstances dictate that an investment accounted for under the cost method should no longer be a cost method investee but be accounted for under the equity method, there will no longer be a required retrospective restatement. Nielsen is currently assessing the impact of the adoption of this ASU will have on the Company s condensed consolidated financial statements. Compensation- Stock Compensation In March 2016, the FASB issued an ASU, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The new standard simplifies several aspects related to the accounting for share-based payment transactions, including the accounting for income taxes, statutory tax withholding requirements, forfeitures and classification on the statement of cash flows. This guidance is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2016; however, early adoption is permitted. Nielsen elected to early adopt this ASU and as a result recorded a $47 million cumulative-effect adjustment to retained earnings as of January 1, 2016 related to previously unrecognized excess tax benefits. Further, the Company elected to apply the retrospective transition method to the amendments related to the presentation of excess tax benefits on the statement of cash flows. This change resulted in a $26 million increase to operating cash flow and a $26 million decrease to cash flows from financing activities for the period ended March 31, Business Acquisitions For the three months ended March 31, 2016, Nielsen paid cash consideration of $47 million associated with both current period and previously executed acquisitions, net of cash acquired. Had these current period acquisitions occurred as of January 1, 2016, the impact on Nielsen s consolidated results of operations would not have been material. For the three months ended March 31, 2015, Nielsen paid cash consideration of $191 million associated with both current period and previously executed acquisitions, net of cash acquired. Had these acquisitions occurred as of January 1, 2015, the impact on Nielsen s consolidated results of operations would not have been material

9 4. Goodwill and Other Intangible Assets Goodwill The table below summarizes the changes in the carrying amount of goodwill by reportable segment for the three months ended March 31, (IN MILLIONS) Buy Watch Total Balance, December 31, 2015 $ 2,789 $ 4,994 $ 7,783 Acquisitions, divestitures and other adjustments Effect of foreign currency translation Balance, March 31, 2016 $ 2,854 $ 5,033 $ 7,887 At March 31, 2016, $58 million of the goodwill is expected to be deductible for income tax purposes. During 2016 we updated our reporting structure in a manner that changed the composition of our reporting units. As a result of this change in reporting units, we performed an interim goodwill impairment analysis during 2016 immediately prior to the change and determined the estimated fair values of the impacted reporting units exceeded their carrying value (including goodwill). As such, there was no impairment as a result of this change. Other Intangible Assets Gross Amounts Accumulated Amortization March 31, December 31, March 31, December 31, (IN MILLIONS) Indefinite-lived intangibles: Trade names and trademarks $ 1,921 $ 1,921 $ $ Amortized intangibles: Trade names and trademarks (88) (84) Customer-related intangibles 3,028 3,013 (1,230) (1,193) Covenants-not-to-compete (36) (35) Computer software 2,025 1,919 (1,108) (1,055) Patents and other (90) (86) Total $ 5,430 $ 5,304 $ (2,552) $ (2,453) Amortization expense associated with the above intangible assets was $101 million and $100 million for the three months ended March 31, 2016 and 2015, respectively. These amounts included amortization expense associated with computer software of $53 million and $54 million for the three months ended March 31, 2016 and 2015, respectively. 5. Changes in and Reclassification out of Accumulated Other Comprehensive Loss by Component The table below summarizes the changes in accumulated other comprehensive loss, net of tax, by component for the three months ended March 31, 2016 and Currency Translation Post Employment Adjustments Cash Flow Hedges Benefits Total (IN MILLIONS) Balance December 31, 2015 $ (767) $ (3) $ (289) $ (1,059) Other comprehensive income/(loss) before reclassifications 91 (8) 4 87 Amounts reclassified from accumulated other comprehensive income/(loss) Net current period other comprehensive income/(loss) 91 (7) 7 91 Net current period other comprehensive income attributable to noncontrolling interest 1 1 Net current period other comprehensive income/(loss) attributable to Nielsen stockholders 90 (7) 7 90 Balance March 31, 2016 $ (677) $ (10) $ (282) $ (969) - 9 -

10 Currency Available- Translation for-sale Post Employment Adjustments Securities Cash Flow Hedges Benefits Total (IN MILLIONS) Balance December 31, 2014 $ (418) $ 19 $ (2) $ (376) $ (777) Other comprehensive (loss)/income before reclassifications (172) 3 (5) 1 (173) Amounts reclassified from accumulated other comprehensive (loss)/income Net current period other comprehensive (loss)/income (172) 3 (3) 6 (166) Net current period other comprehensive loss attributable to noncontrolling interest (3) (3) Net current period other comprehensive (loss)/income attributable to Nielsen stockholders (169) 3 (3) 6 (163) Balance March 31, 2015 $ (587) $ 22 $ (5) $ (370) $ (940) The table below summarizes the reclassification of accumulated other comprehensive loss by component for the three months ended March 31, 2016 and 2015, respectively. Amount Reclassified from Accumulated Other (IN MILLIONS) Comprehensive Loss Details about Accumulated Affected Line Item in the Other Comprehensive Three Months Ended Three Months Ended Condensed Consolidated Income components March 31, 2016 March 31, 2015 Statement of Operations Cash flow hedges Interest rate contracts $ 1 $ 3 Interest expense 1 Benefit for income taxes $ 1 $ 2 Total, net of tax Amortization of Post-Employment Benefits Actuarial loss $ 5 $ 6 (a) 2 1 Benefit for income taxes $ 3 $ 5 Total, net of tax Total reclassification for the period $ 4 $ 7 Net of tax (a) This accumulated other comprehensive loss component is included in the computation of net periodic pension cost. 6. Restructuring Activities A summary of the changes in the liabilities for restructuring activities is provided below: (IN MILLIONS) Total Initiatives Balance at December 31, 2015 $ 38 Charges 10 Payments (15) Balance at March 31, 2016 $ 33 Nielsen recorded $10 million and $14 million in restructuring charges for the three months ended March 31, 2016 and 2015, respectively, primarily relating to severance costs. Of the $33 million in remaining liabilities for restructuring actions at March 31, 2016, $25 million is expected to be paid within one year and is classified as a current liability within the condensed consolidated balance sheet as of March 31, Fair Value Measurements Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value, the Company considers the principal

11 or most advantageous market in which the Company would transact, and also considers assumptions that market participants would use when pricing the ass et or liability, such as inherent risk, transfer restrictions, and risk of non-performance. There are three levels of inputs that may be used to measure fair value: Level 1: Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. Level 2: Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 3: Pricing inputs that are generally unobservable and may not be corroborated by market data. Financial Assets and Liabilities Measured on a Recurring Basis The Company s financial assets and liabilities are measured and recorded at fair value, except for equity method investments, cost method investments, and long-term debt. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. The Company s assessment of the significance of a particular input to the fair value measurements requires judgment, and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy. The following table summarizes the valuation of the Company s material financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2016 and December 31, 2015: March 31, (IN MILLIONS) 2016 Level 1 Level 2 Level 3 Assets: Plan assets for deferred compensation (1 ) Investment in mutual funds (2 ) 2 2 Total $ 32 $ 32 $ Liabilities: Interest rate swap arrangements (3 ) $ 14 $ 14 Deferred compensation liabilities (4 ) Total $ 44 $ 30 $ 14 December 31, 2015 Level 1 Level 2 Level 3 Assets: Plan assets for deferred compensation (1 ) Investment in mutual funds (2 ) 2 2 Total $ 32 $ 32 Liabilities: Interest rate swap arrangements (3 ) $ 6 $ 6 Deferred compensation liabilities (4 ) Total $ 36 $ 30 $ 6 ( 1 ) Plan assets are comprised of investments in mutual funds, which are intended to fund liabilities arising from deferred compensation plans. These investments are carried at fair value, which is based on quoted market prices at period end in active markets. These investments are classified as trading securities with any gains or losses resulting from changes in fair value recorded in other expense, net. (2 ) Investments in mutual funds are money-market accounts held with the intention of funding certain specific retirement plans. (3 ) Derivative financial instruments include interest rate swap arrangements recorded at fair value based on externally-developed valuation models that use readily observable market parameters and the consideration of counterparty risk. (4 ) The Company offers certain employees the opportunity to participate in a deferred compensation plan. A participant s deferrals are invested in a variety of participant directed stock and bond mutual funds and are classified as trading securities. Changes in the fair value of these securities are measured using quoted prices in active markets based on the market price per unit multiplied by the number of units held exclusive of any transaction costs. A corresponding adjustment for changes in fair value of the trading securities is also reflected in the changes in fair value of the deferred compensation obligation

12 Derivative Financial Instruments Nielsen primarily uses interest rate swap derivative instruments to manage risk that changes in interest rates will affect the cash flows of its underlying debt obligations. To qualify for hedge accounting, the hedging relationship must meet several conditions with respect to documentation, probability of occurrence, hedge effectiveness and reliability of measurement. Nielsen documents the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions as well as the hedge effectiveness assessment, both at the hedge inception and on an ongoing basis. Nielsen recognizes all derivatives at fair value either as assets or liabilities in the consolidated balance sheets and changes in the fair values of such instruments are recognized currently in earnings unless specific hedge accounting criteria are met. If specific cash flow hedge accounting criteria are met, Nielsen recognizes the changes in fair value of these instruments in accumulated other comprehensive income/(loss). Nielsen manages exposure to possible defaults on derivative financial instruments by monitoring the concentration of risk that Nielsen has with any individual bank and through the use of minimum credit quality standards for all counterparties. Nielsen does not require collateral or other security in relation to derivative financial instruments. A derivative contract entered into between Nielsen or certain of its subsidiaries and a counterparty that was also a lender under Nielsen s senior secured credit facilities at the time the derivative contract was entered into is guaranteed under the senior secured credit facilities by Nielsen and certain of its subsidiaries (see Note 8 - Long-term Debt and Other Financing Arrangements for more information). Since it is Nielsen s policy to only enter into derivative contracts with banks of internationally acknowledged standing, Nielsen considers the counterparty risk to be remote. It is Nielsen s policy to have an International Swaps and Derivatives Association ( ISDA ) Master Agreement established with every bank with which it has entered into any derivative contract. Under each of these ISDA Master Agreements, Nielsen agrees to settle only the net amount of the combined market values of all derivative contracts outstanding with any one counterparty should that counterparty default. Certain of the ISDA Master Agreements contain cross-default provisions where if the Company either defaults in payment obligations under its credit facility or if such obligations are accelerated by the lenders, then the Company could also be declared in default on its derivative obligations. At March 31, 2016, Nielsen had no material exposure to potential economic losses due to counterparty credit default risk or cross-default risk on its derivative financial instruments. ForeignCurrencyExchangeRisk Foreign currency translation risk is the risk that exchange rate gains or losses arise from translating foreign entities statements of earnings and balance sheets from functional currency to our reporting currency (the U.S. Dollar) for consolidation purposes. Nielsen manages translation risk exposure by creating natural hedges in its financing or by using derivative financial instruments aimed at offsetting certain exposures in the statement of earnings or the balance sheet. Nielsen does not trade derivative financial instruments for speculative purposes. During the quarters ended March 31, 2016 and 2015, Nielsen recorded a net gain of zero and $2 million, respectively, associated with foreign currency derivative financial instruments within foreign currency exchange transactions losses, net in our condensed consolidated statements of operations. As of March 31, 2016 and December 31, 2015 the notional amount of the outstanding foreign currency derivative financial instruments were $132 million and $37 million, respectively. InterestRateRisk Nielsen is exposed to cash flow interest rate risk on the floating-rate U.S. Dollar and Euro Term Loans, and uses floating-to-fixed interest rate swaps to hedge this exposure. For these derivatives, Nielsen reports the after-tax gain or loss from the effective portion of the hedge as a component of accumulated other comprehensive income/(loss) and reclassifies it into earnings in the same period or periods in which the hedged transaction affects earnings, and within the same income statement line item as the impact of the hedged transaction. As of March 31, 2016 the Company had the following outstanding interest rate swaps utilized in the management of its interest rate risk: Notional Amount Maturity Date Currency Interest rate swaps designated as hedging instruments US Dollar term loan floating-to-fixed rate swaps $ 1,575,000,000 May 2016 US Dollar US Dollar term loan floating-to-fixed rate swaps $ 500,000,000 November 2016 US Dollar US Dollar term loan floating-to-fixed rate swaps $ 250,000,000 September 2017 US Dollar US Dollar term loan floating-to-fixed rate swaps $ 250,000,000 May 2018 US Dollar US Dollar term loan floating-to-fixed rate swaps $ 150,000,000 April 2019 US Dollar US Dollar term loan floating-to-fixed rate swaps $ 150,000,000 July 2019 US Dollar

13 Nielsen expects to recognize approximately $ 7 million of net pre-tax losses from accumulated other comprehensive loss to interest expense in the next 12 months associated with its interest-related derivative financial instruments. FairValuesofDerivativeInstrumentsintheConsolidatedBalanceSheets The fair values of the Company s derivative instruments as of March 31, 2016 and December 31, 2015 were as follows: March 31, 2016 December 31, 2015 Derivatives Designated as Hedging Accounts Payable Accounts Payable Other Instruments and Other Current Other Non-Current and Other Current Non-Current (IN MILLIONS) Liabilities Liabilities Liabilities Liabilities Interest rate swaps $ $ 14 $ 1 $ 5 DerivativesinCashFlowHedgingRelationships The pre-tax effect of derivative instruments in cash flow hedging relationships for the three months ended March 31, 2016 and 2015 was as follows: Amount of Loss Amount of Loss Reclassified from AOCI Recognized in OCI Location of Loss into Income (Effective Portion) Reclassified from AOCI (Effective Portion) Derivatives in Cash Flow Three Months Ended into Income (Effective Three Months Ended Hedging Relationships March 31, Portion) March 31, (IN MILLIONS) Interest rate swaps $ 10 $ 8 Interest expense $ 1 $ 3 Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis The Company is required, on a nonrecurring basis, to adjust the carrying value using fair value measurements or provide valuation allowances for certain assets using the more-likely-than-not criteria. The Company s equity method investments, cost method investments, and non-financial assets, such as goodwill, intangible assets, and property, plant and equipment, are measured at fair value when there is an indicator of impairment and recorded at fair value only when an impairment charge is recognized. The Company did not measure any material non-financial assets or liabilities at fair value during the three months ended March 31,

14 8. Long-term Debt and Other Financing Arrangements Unless otherwise stated, interest rates are as of March 31, March 31, 2016 December 31, 2015 Weighted Weighted Interest Carrying Fair Interest Carrying Fair (IN MILLIONS) Rate Amount Value Rate Amount Value $1,580 million Senior secured term loan (LIBOR based variable rate of 2.18% ) due ,455 1,454 $2,080 million Senior secured term loan (LIBOR based variable rate of 2.44% ) due ,933 1,932 $500 million Senior secured term loan (LIBOR based variable rate of 2.69% ) due $1,100 million Senior secured term loan (LIBOR based variable rate of 3.44% ) due ,077 1,083 1,080 1, million Senior secured term loan (Euro LIBOR based variable rate of 2.71%) due $575 million senior secured revolving credit facility (Euro LIBOR or LIBOR based variable rate) due Total senior secured credit facilities (with weightedaverage interest rate) 2.90% 3,820 3, % 3,496 3,497 $800 million 4.50% senior debenture loan due $625 million 5.50% senior debenture loan due $2,300 million 5.00% senior debenture loan due ,284 2,336 2,284 2,270 Total debenture loans (with weighted-average interest rate) 5.22% 3,693 3, % 3,693 3,718 Other loans Total long-term debt 4.05% 7,520 7, % 7,196 7,222 Capital lease and other financing obligations Total debt and other financing arrangements 7,660 7,338 Less: Current portion of long-term debt, capital lease and other financing obligations and other short-term borrowings Non-current portion of long-term debt and capital lease and other financing obligations $ 7,471 $ 7,028 The fair value of the Company s long-term debt instruments was based on the yield on public debt where available or current borrowing rates available for financings with similar terms and maturities and such fair value measurements are considered Level 1 or Level 2 in nature, respectively. Annual maturities of Nielsen s long-term debt are as follows: (IN MILLIONS) For April 1, 2016 to December 31, 2016 $ , ,952 Thereafter 2,309 $ 7,520 On March 30, 2016, the Company entered into an amendment to its Fourth Amended and Restated Credit Agreement (the Amended Credit Agreement ), dated as of April 22, 2014, which provides for additional Class A Term Loans in an aggregate principal amount of $500 million, maturing in full in April 2019 (the Additional Class A Term Loans ). The Additional Class A Term Loans are required to be repaid in quarterly installments ranging from 1.369% to 4.11% of the original principal amount (as may be reduced as a result of voluntary prepayments), with the balance payable on the maturity date. The Additional Class A Term Loans bear interest equal to, at the election of Nielsen, a base rate or eurocurrency rate, in each case plus an applicable margin which ranges

15 from 0.50% to 1.25% (in the case of base rate loans) or 1.50% to 2.25% (in the case of eurocurrency rate loans). The specific applicable margin is determined by the Company s total leverage ratio (as defined in the A mended Credit Agreement). This amendment was accounted for as a modification of the Amended Credit Agreement. 9. Stockholders Equity Common stock activity is as follows: Three Months Ended March 31, 2016 Actual number of shares of common stock outstanding Beginning of period 362,338,369 Shares of common stock issued through compensation plans 517,378 Repurchases of common stock (1,745,144) End of period 361,110,603 On January 31, 2013, the Company s Board of Directors adopted a cash dividend policy to pay quarterly cash dividends on its outstanding common stock. The below table summarizes the dividends declared on Nielsen s common stock during 2015 and the three months ended March 31, Declaration Date Record Date Payment Date Dividend Per Share February 19, 2015 March 5, 2015 March 19, 2015 $ 0.25 April 20, 2015 June 4, 2015 June 18, 2015 $ 0.28 July 23, 2015 August 27, 2015 September 10, 2015 $ 0.28 October 29, 2015 November 24, 2015 December 8, 2015 $ 0.28 February 18, 2016 March 3, 2016 March 17, 2016 $ 0.28 On April 19, 2016, the Company s Board of Directors declared a cash dividend of $0.31 per share on our common stock. The dividend is payable on June 16, 2016 to stockholders of record at the close of business on June 2, The dividend policy and the payment of future cash dividends are subject to the discretion of the Company s Board of Directors. The Company s Board of Directors has approved a share repurchase program, as included in the below table, for up to $2 billion in the aggregate of our outstanding common stock. The primary purpose of the program is to return value to shareholders and to mitigate dilution associated with our equity compensation plans. Share Repurchase Authorization Board Approval ($ in millions) July 25, 2013 $ 500 October 23, 2014 $ 1,000 December 11, 2015 $ 500 Total Share Repurchase Authorization $ 2,000 Repurchases under these plans will be made in accordance with applicable securities laws from time to time in the open market or otherwise depending on our evaluation of market conditions and other factors. This program has been executed within the limitations of the existing authority granted at Nielsen s Annual General Meeting of Shareholders held in 2015 and As of March 31, 2016, there have been 27,507,555 shares of our common stock purchased at an average price of $44.64 per share (total consideration of approximately $1,228 million) under this program

16 The activity for the three months ended March 31, 2016 consisted of open market share repurchases and is summarized in the following table: Total Number of Shares Purchased as Dollar Value of Shares Total Number Average Part of Publicly that may yet be of Shares Price Paid Announced Plans Purchased under the Period Purchased per Share or Programs Plans or Programs As of December 31, ,762,411 $ ,762,411 $ 855,495, Activity January , ,054 $ 826,841,315 February ,473 $ ,473 $ 794,246,197 March ,617 $ ,617 $ 772,128,086 Total 27,507,555 $ ,507, Income Taxes The effective tax rates for the three months ended March 31, 2016 and 2015 were 30% and 38%, respectively. The tax rate for the three months ended March 31, 2016 was higher than the statutory rate as a result of the impact of tax rate differences in other jurisdictions where the Company files tax returns, and the effect of global licensing activities and foreign distributions, offset by the favorable impact of certain financing activities, the impact of share-based compensation excess tax benefit, and the release of certain tax contingencies. The tax rate for the three months ended March 31, 2015 was higher than the statutory rate as a result of the impact of tax rate differences in other jurisdictions where the Company files tax returns, the effect of global licensing activities and foreign distributions and audit settlements, offset by the favorable impact of certain financing activities and the release of certain tax contingencies. The principal reasons for the reduction in the first quarter effective tax rate in 2016 when compared to 2015 was due to the impact of share-based compensation excess tax benefit and increases in the amount of releases of certain tax contingencies. The estimated liability for unrecognized tax benefits as of December 31, 2016 is $466 million and was $461 million as of December 31, If the Company s tax positions are favorably sustained by the taxing authorities, the reversal of the underlying liabilities would reduce the Company s effective tax rate in future periods. The Company files numerous consolidated and separate income tax returns in the U.S. and in many state and foreign jurisdictions. With few exceptions the Company is no longer subject to U.S. Federal income tax examination for 2006 and prior periods. In addition, the Company has subsidiaries in various states, provinces and countries that are currently under audit for years ranging from 2003 through To date, the Company is not aware of any material adjustments not already accrued related to any of the current Federal, state or foreign audits under examination. 11. Commitments and Contingencies LegalProceedingsandContingencies Nielsen is subject to litigation and other claims in the ordinary course of business, some of which include claims for substantial sums. Accruals have been recorded when the outcome is probable and can be reasonably estimated. While the ultimate results of claims and litigation cannot be determined, the Company does expect that the ultimate disposition of these matters will not have a material adverse effect on its operations or financial condition. However, depending on the amount and the timing, an unfavorable resolution of some or all of these matters could materially affect the Company s future results of operations or cash flows in a particular period. 12. Segments The Company aligns its operating segments in order to conform to management s internal reporting structure, which is reflective of service offerings by industry. Management aggregates such operating segments into two reporting segments: what consumers buy ( Buy ), consisting principally of market research information and analytical services; and what consumers watch ( Watch ), consisting principally of television, radio, online and mobile audience and advertising measurement and corresponding analytics. Corporate consists principally of unallocated items such as certain facilities and infrastructure costs as well as intersegment eliminations. Certain corporate costs, other than those described above, including those related to selling, finance, legal, human resources, and information technology systems, are considered operating costs and are allocated to the Company s segments based on

17 either the actual amount of costs incurred or on a basis consistent with the operati ons of the underlying segment. Information with respect to the operations of each of Nielsen s business segments is set forth below based on the nature of the services offered and geographic areas of operations. Business Segment Information (IN MILLIONS) Buy Watch Corporate Total Three Months Ended March 31, 2016 Revenues $ 793 $ 694 $ 1,487 Depreciation and amortization $ 51 $ 95 $ 1 $ 147 Restructuring charges $ 6 $ 2 $ 2 $ 10 Stock-based compensation expense $ 4 $ 3 $ 6 $ 13 Other items (1) $ 1 $ $ 7 $ 8 Operating income/(loss) $ 52 $ 197 $ (25) $ 224 Business segment income/(loss) (2) $ 114 $ 297 $ (9) $ 402 Total assets as of March 31, 2016 $ 6,613 $ 8,720 $ 255 $ 15,588 (IN MILLIONS) Buy Watch Corporate Total Three Months Ended March 31, 2015 Revenues $ 798 $ 660 $ 1,458 Depreciation and amortization $ 53 $ 88 $ 1 $ 142 Restructuring charges $ 7 $ 4 $ 3 $ 14 Stock-based compensation expense $ 5 $ 2 $ 7 $ 14 Other items (1) $ $ $ 11 $ 11 Operating income/(loss) $ 45 $ 184 $ (30) $ 199 Business segment income/(loss) (2) $ 110 $ 278 $ (8) $ 380 Total assets as of December 31, 2015 $ 6,537 $ 8,650 $ 116 $ 15,303 (1) Other items primarily consist of non-recurring costs for the three months ended March 31, 2016 and ( 2 ) The Company s chief operating decision maker uses business segment income/(loss) to measure performance from period to period both at the consolidated level as well as within its operating segments. 13. Guarantor Financial Information The following supplemental financial information is being provided for purposes of compliance with reporting covenants contained in certain debt obligations of Nielsen and its subsidiaries. The financial information sets forth for Nielsen, its subsidiaries that have issued certain debt securities (the Issuers ) and its guarantor and non-guarantor subsidiaries, the consolidating balance sheet as of March 31, 2016 and December 31, 2015 and consolidating statements of operations and cash flows for the periods ended March 31, 2016 and During the three months ended September 30, 2015, the Company re-designated certain subsidiaries between guarantor and non-guarantor. As a result, the Company adjusted prior periods to reflect the current year structure. The issued debt securities are jointly and severally guaranteed on a full and unconditional basis by Nielsen and subject to certain exceptions, each of the direct and indirect 100% owned subsidiaries of Nielsen, in each case to the extent that such entities provide a guarantee under the senior secured credit facilities. The issuers are also 100% owned indirect subsidiaries of Nielsen: Nielsen Finance LLC and Nielsen Finance Co. for certain series of debt obligations, and The Nielsen Company (Luxembourg) S.ar.l., for the other series of debt obligations. Each issuer is a guarantor of the debt obligations not issued by it. Nielsen is a holding company and does not have any material assets or operations other than ownership of the capital stock of its direct and indirect subsidiaries. All of Nielsen s operations are conducted through its subsidiaries, and, therefore, Nielsen is expected to continue to be dependent upon the cash flows of its subsidiaries to meet its obligations. The senior secured credit facilities contain certain limitations on the ability of Nielsen to receive the cash flows of its subsidiaries. While all subsidiary guarantees of the issued debt securities are full and unconditional, these guarantees contain customary release provisions including when (i) the subsidiary is sold or sells all of its assets, (ii) the subsidiary is declared unrestricted for covenant purposes, (iii) the subsidiary s guarantee under the senior secured credit facilities is released and (iv) the requirements for discharge of the indenture have been satisfied

18 Nielsen Holdings plc Condensed Consolidating Statement of Comprehensive Income (Unaudited) For the three months ended March 31, 2016 (IN MILLIONS) Parent Issuers Guarantor Non- Guarantor Elimination Consolidated Revenues $ $ $ 871 $ 616 $ $ 1,487 Cost of revenues, exclusive of depreciation and amortization shown separately below Selling, general and administrative expenses, exclusive of depreciation and amortization shown separately below Depreciation and amortization Restructuring charges Operating income Interest income (219) 1 Interest expense (1) (74) (214) (9) 219 (79) Foreign currency exchange transaction losses, net (1) (1) Other (expense)/income, net (1) 8 (7) (Loss)/income from continuing operations before income taxes and equity in net income/(loss) of subsidiaries (1) 135 (41) (Provision)/benefit for income taxes (47) 28 (25) (44) Equity in net income/(loss) of subsidiaries 101 (10) 114 (205) Net income (205) 101 Less: Net income attributable to noncontrolling interests 1 1 Net income attributable to controlling interests (205) 100 Total other comprehensive income (295) 91 Total other comprehensive income attributable to noncontrolling interests 1 1 Total other comprehensive income attributable to controlling interests (295) 90 Total comprehensive income (500) 192 Comprehensive income attributable to noncontrolling interests 2 2 Total comprehensive income attributable to controlling interest $ 190 $ 192 $ 191 $ 117 $ (500) $

19 Nielsen Holdings plc Condensed Consolidated Statement of Comprehensive Income (Unaudited) For the three months ended March 31, 2015 (IN MILLIONS) Parent Issuers Guarantor Non- Guarantor Elimination Consolidated Revenues $ $ $ 846 $ 612 $ $ 1,458 Cost of revenues, exclusive of depreciation and amortization shown separately below Selling, general and administrative expenses, exclusive of depreciation and amortization shown separately below Depreciation and amortization Restructuring charges Operating (loss)/income (1) Interest income (231) 1 Interest expense (68) (224) (12) 231 (73) Foreign currency exchange transaction losses, net (11) (15) (26) Other (expense)/income, net (17) 17 (Loss)/income from continuing operations before income taxes and equity in net income/(loss) of subsidiaries and affiliates (1) 152 (89) (Provision)/benefit for income taxes (53) 39 (24) (38) Equity in net income/(loss) of subsidiaries 64 (15) 114 (163) Net income (163) 63 Total other comprehensive loss (163) (9) (163) (232) 401 (166) Total other comprehensive loss attributable to noncontrolling interests (3) (3) Total other comprehensive loss attributable to controlling interests (163) (9) (163) (229) 401 (163) Total comprehensive (loss)/income (100) 75 (99) (217) 238 (103) Comprehensive loss attributable to noncontrolling interests (3) (3) Total comprehensive (loss)/income attributable to controlling interest $ (100) $ 75 $ (99) $ (214) $ 238 $ (100)

20 Nielsen Holdings plc Condensed Consolidating Balance Sheet (Unaudited) March 31, 2016 (IN MILLIONS) Parent Issuers Guarantor Non- Guarantor Elimination Consolidated Assets: Current assets Cash and cash equivalents $ Trade and other receivables, net ,239 Prepaid expenses and other current assets Intercompany receivables (1,129) Total current assets ,122 1,313 (1,129) 2,054 Non-current assets Property, plant and equipment, net Goodwill 5,739 2,148 7,887 Other intangible assets, net 4, ,799 Deferred tax assets Other non-current assets Equity investment in subsidiaries 5,080 1,533 3,937 (10,550) Intercompany loans 11,274 3, (15,356) Total assets $ 5,091 $ 13,545 $ 19,620 $ 4,367 $ (27,035) $ 15,588 Liabilities and equity: Current liabilities Accounts payable and other current liabilities $ $ 95 $ 362 $ 458 $ $ 915 Deferred revenues Income tax liabilities Current portion of long-term debt, capital lease obligations and short-term borrowings Intercompany payables (1,129) Total current liabilities , (1,129) 1,504 Non-current liabilities Long-term debt and capital lease obligations 7, ,471 Deferred tax liabilities ,024 Intercompany loans 549 2,985 11, (15,356) Other non-current liabilities Total liabilities ,669 14,540 1,577 (16,485) 10,876 Total stockholders equity 4,516 2,876 5,080 2,594 (10,550) 4,516 Noncontrolling interests Total equity 4,516 2,876 5,080 2,790 (10,550) 4,712 Total liabilities and equity $ 5,091 $ 13,545 $ 19,620 $ 4,367 $ (27,035) $ 15,